The dollar saw a modest increase in value ahead of several central bank meetings scheduled for the week, including potentially significant policy shifts by the Bank of Japan (BOJ). Meanwhile, market participants awaited the Federal Reserve’s latest rate cut projections.
Dollar Index Rises:
The dollar index, which measures the performance of the US dollar against a basket of major currencies, climbed 0.145% to 103.600. The dollar has strengthened by over 2% since the beginning of the year, fueled by better-than-expected US economic performance, leading investors to reconsider expectations for rapid and deep rate cuts by the Federal Reserve.
Focus on Fed Projections:
Investors were particularly attentive to the Federal Reserve’s upcoming meeting, scheduled for Wednesday, where they anticipated updates to the central bank’s economic projections, known as dot plots. Markets were closely monitoring any changes in the Fed’s outlook for rate cuts in 2024. Expectations have shifted, with fewer rate cuts now priced in for the year.
Japanese Yen Steady Amid Policy Speculation:
The Japanese yen remained relatively stable, trading marginally higher at 149.16 per dollar. The yen had experienced volatility in recent weeks, driven by expectations that the Bank of Japan might end its negative interest rate policy. However, uncertainties lingered, with market participants awaiting the BOJ’s decision.
Euro and Pound Weaken:
The euro weakened slightly against the dollar, reaching $1.0871, down 0.15%, while the pound sterling declined to $1.27245, down 0.12%, ahead of the Bank of England meeting scheduled for Thursday.
Anticipation of Central Bank Actions:
Investors were also monitoring other central bank meetings scheduled for the week, including Australia’s central bank meeting on Tuesday and the Swiss National Bank meeting on Thursday. While the Australian dollar edged lower against the US dollar, some investors speculated about potential interest rate cuts by the Swiss National Bank amid consistent inflation within its target range.
As markets awaited further guidance from central banks, particularly the Federal Reserve and the Bank of Japan, the direction of major currencies remained uncertain, with traders closely analyzing any policy shifts or projections that could influence currency movements in the near term.